Under-Fire Vodafone India Reviews Lucrative PR Mandate

MUMBAI--Vodafone is reviewing its lucrative Indian public relations mandate, amid an increasingly testy tax battle with the country’s authorities.

The account is one of India’s largest 'single-company' PR retainers, bearing in mind the higher spend of conglomerates. Fee estimates vary from $600k to as much as $1m, for an assignment that includes corporate and consumer communications.

It has been handled by Genesis Burson-Marsteller for the past decade, with the agency expected to defend its hold on a key source of revenue.

The Holmes Report understands that at least three other firms have submitted proposals ahead of a pitch next month: Adfactors, Text 100 and IPAN Hill + Knowlton. It is also thought that Ogilvy PR may take part in the review.

The development follows the arrival at Vodafone of new external relations director Manu Kapoor last month from Cairn India. The former P&G executive has his work cut out at the UK-based telecoms player, which is currently embroiled in a long-running tax battle with the Indian government regarding its acquisition of Indian mobile company Hutchison Essar five years ago.

At the start of this year, the Supreme Court ruled in Vodafone’s favour, prompting Indian authorities to unveil plans to change the country’s tax laws, with retrospective effect. The move could cost Vodafone as much as $3.7bn in capital gains tax, fines and interest charges.

One source familiar with the situation told the Holmes Report that the environment has become “very difficult” for Vodafone, which is India’s largest foreign investor. The company has responded by threatening legal action and sounding the alarm among other international companies about the proposed legal changes.

Previously, Vodafone enlisted IPAN Hill + Knowlton to provide specific PR support for the tax case. Political leaders, including UK chancellor George Osborne and US treasury secretary Tim Geithner, and trade bodies have also lobbied on the company’s behalf.

Vodafone is India's third-largest mobile network, behind Airtel and Reliance, recently reporting a revenue rise of 19.5 percent for its most recent fiscal year, taking earnings to around $5.8bn.

The company is no stranger to tax disputes. Vodafone settled a long-running case with the UK government in 2010, paying £1.25bn and sparking protests that Vodafone had avoided a much bigger bill.

The tax case is the not the only issue facing Vodafone in India. The company has pushed back a planned IPO as it awaits a Government decision regarding the auction of 2G telecoms licences. The licences were initially awarded without an auction in 2008, triggering a $35bn corruption scandal that has claimed the scalps of politicans and businessmen, and forced the demise of India’s largest PR firm, Vaishnavi.

The 2G licences have since been cancelled and are to be redistributed through an open bidding process. Another industry concern affecting Vodafone is recent criticism of the radiation levels of India’s cellular towers. Several organizations and citizen groups have held protests in recent weeks, claiming that the towers pose health risks.